Question

Explain your understanding of Contracting-out. In a minimum of 300 words, detail important and interesting aspects of Outsourcing.

Answer 1

Under the old state pension rules, you were able to ‘contract out’ of the additional state pension. Contracting out ended in April 2016, but your contracting-out history will still impact how much state pension you get under both the old and the new system. In addition to the basic state pension, the state previously provided a second-tier top-up pension, based on how much you earned – the additional state pension. Introduced in 1978 and originally called the state earnings related pension scheme (Serps), it became the state second pension (S2P) in 2002. Before 2012's rule changes, employees were allowed to 'contract out' of this additional pension. In exchange for lower or redirected National Insurance contributions, they gave up part or all of it and received extra pension from their occupational scheme or personal/stakeholder pension instead. Until 1988, people could only contract out if they were members of a defined benefit (DB) occupational pension scheme. In 1988, the government extended this to defined contribution (DC) or money purchase occupational schemes and personal pensions. For the first five years of the scheme, the government paid an extra 2% of your earnings into your personal pension. By 1992, more than 5 million people had left Serps for a personal pension.

More & more companies across the globe are choosing the outsourcing strategy. There are a number of reasons behind it but cost-cutting is the prime reason. The other benefits of outsourcing are that it allows you to:

• Access to a wide talent pool of experts
• Focus on core business activities
• Flexibility to hire staff
• Offer round the clock service

Whether you are a startup or an established enterprise, outsourcing can help you gain an edge over your competitors. Still, offshore software development is a strong topic of debate.

• 59% of companies outsource to reduce or control cost
• 57% do it to focus on business objectives
• 47% to solve capacity issues
• 31% to improve service quality
• 28% to take help from talented professionals
• 17% of their business environment